Lemonade,a good with many close substitutes,should have an own price elasticity that is:
A) unitary.
B) relatively elastic.
C) relatively inelastic.
D) perfectly inelastic.

Question

Quizplus · Accepted Answer

Lemonade has many close substitutes, which means that consumers have many options to choose from if the price of lemonade increases. This makes the demand for lemonade relatively elastic, meaning that a small change in price would result in a relatively large change in the quantity demanded. Therefore, the own price elasticity of lemonade should be relatively elastic, which corresponds to choice B.

Lemonade,a Good with Many Close Substitutes,should Have an Own Price